2017 News

August 10, 2017

Vancouver, B.C., August 10, 2017.Desert Star Resources Ltd. (TSX-V: DSR) (“Desert Star” or the “Company”) is pleased to announce it has agreed to terms on a non-binding Early Deposit Precious Metals Purchase Agreement (“PMPA”) with Wheaton Precious Metals Corp. (TSX:WPM) (NYSE:WPM) (“Wheaton”) under which Wheaton will pay Desert Star cash consideration totaling US$65 million for up to 100% of the payable silver production and up to 100% of the payable gold production from the Company’s Kutcho Cu-Zn-Ag-Au Project in northwest British Columbia. In addition, Wheaton will make ongoing production payments to Desert Star equal to 20% of the applicable spot prices of silver and gold delivered. An additional payment of up to US$20 million will be payable to Desert Star should the processing capacity increase to 4,500 tonnes per day (“tpd”) or more within five years of attaining commercial production, compared with the 2,500 tpd operation contemplated in the 2017 Prefeasibility Study (“2017 PFS”).

Under the terms of the proposed PMPA, Desert Star will be advanced US$7 million as an early deposit (“Early Deposit”) with payments to be used to fund feasibility study expenditures. The balance of the US$65 million would be payable in instalments during construction of the Kutcho Project. Wheaton has also agreed to participate in up to 14% of a proposed Desert Star equity financing to a maximum of C$4 million where the use of proceeds include the acquisition of the Kutcho Project by Desert Star (the “Acquisition”), as previously announced on June 15, 2017. The precious metals stream is subject to completion of a definitive PMPA, completion of the Acquisition and other customary conditions.

“The agreement with Wheaton represents a significant milestone towards the Acquisition and subsequent development of the Kutcho Project,” stated Vince Sorace, President and CEO of Desert Star. “Wheaton’s involvement validates our conviction in the Kutcho Project. We believe it is an exceptional opportunity, with significant near-term upside potential in the project economics, throughput expansion and increase of the existing mineral reserves and resources. The Early Deposit structure allows Desert Star the flexibility to advance Kutcho through a Feasibility Study and to a construction decision with significantly reduced dilution to shareholders.”

In addition to the proposed PMPA with Wheaton, Desert Star announces an agreement between the Company and Capstone to extend the outside date for the completion of the Acquisition from August 31, 2017 to September 30, 2017.

Proposed Early Deposit and equity financing participation provides for funding of approximately C$13 million which represents in excess of 30% of the Acquisition and projected Feasibility Study expenditures.

Balance of the upfront deposit payment of US$58 million represents approximately 35% of the estimated initial capital costs with the precious metals stream representing approximately 7% of revenue from the Kutcho Project based on the assumptions utilized in the 2017 PFS.

Precious metals streaming results in a further increase to the current after-tax IRR of 27.6% detailed in the 2017 PFS.

Expansion payment of up to US$20 million provides capital support for Desert Star’s proposed expansion of Kutcho’s potential.

Equity investment results in Wheaton becoming a significant shareholder of Desert Star and strong alignment with all Kutcho stakeholders.

Transaction Overview

Upfront Payment

Wheaton will make upfront cash payments totaling US$65 million.

Stream

Wheaton will be entitled to purchase 100% of the silver and gold production from the Project until 5.6 million ounces of silver and 51,000 ounces of gold have been delivered, at which point the stream will decrease to 66.67% of the silver and gold production for the life of the mine.

Production Payment

Wheaton will make an ongoing cash payment equal to 20% of the applicable spot price of silver and gold for each ounce delivered under the agreement.

Early Deposit

US$7 million of the US$65 million will be paid by Wheaton on an early deposit basis to fund Feasibility Study expenditures

Expansion Deposit

Wheaton would make an additional payment of up to US$20 million should the Kutcho Project processing throughput be increased to 4,500 tpd or more within 5 years of attaining commercial production.

Wheaton Option

Wheaton will have the option to terminate the PMPA following delivery of a Feasibility Study or after two years if the Feasibility Documentation has not been delivered to Wheaton by such date. Should Wheaton so withdraw, it would forfeit US$1.0 million and be eligible to receive only 9.23% of the payable gold and silver from Kutcho or, in certain circumstances, be paid in cash over time.

Security & Guarantees

In order to secure the Company’s obligations under the PMPA, the Company will grant Wheaton a first ranking security over its assets.

Desert Star Acquisition of Kutcho

Desert Star signed a Definitive Agreement dated June 15, 2017 to acquire 100% of Kutcho Copper Corp. from Capstone Mining Corp., subject to certain conditions precedent, as disclosed in the Company’s news release on June 15, 2017. Completion of the Acquisition remains subject to TSX Venture Exchange approval. Highlights of the Acquisition include:

Capstone to become 9.9% shareholder of Desert Star at the completion of the Acquisition.

Fort Capital is DSR’s financial advisor in connection with the Acquisition

Project Overview

The Kutcho project is located in northern British Columbia, approximately 100 kilometres east of Dease Lake and Highway 37, and consists of one mining lease and 46 mineral exploration claims encompassing 17,060 Hectares.

Mineralization at Kutcho comprises three “Kuroko-type” volcanic massive sulfide (“VMS”) deposits aligned in a westerly plunging linear trend. The largest deposit, Main, comes to surface at the east end of the trend, with Sumac followed by Esso down plunge to the west.

Over C$50 million of historical project expenditures that provided the basis for the 2017 PFS. Desert Star’s study includes parameter changes consistent with current market conditions, such as capital expenditures, operating costs, metal prices and foreign exchange rate.

2017 Prefeasibility Study Highlights

Pre-tax NPV (8% discount rate) of C$423 million and IRR of 34.6%(1).

After-tax NPV (8% discount rate) of C$265 million and IRR of 27.6%(1).

Probable Mineral Reserve(2) of 10.4 million tonnes averaging 2.01% copper, 3.19% zinc, 0.37 g/t gold and 34.61 g/t silver. A 1.5% Cu cut-off grade was used for mineral reserve estimation of the Main zone and 1.0% Cu cut-off for the Esso zone and is based on the 2011 mine plan.

1 Using metal prices of US$2.75/lb copper, US$1.10/lb zinc, US$17.00/oz silver and US$1,250/oz gold and a currency exchange rate of 0.75 USD/CAD2 A Probable Mineral Reserve is the economically mineable part of an Indicated Mineral Resource, and in some circumstances a Measured Mineral Resource, demonstrated by at least a Preliminary Feasibility Study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.3 Measured and Indicated Resources are inclusive of Probable Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.4 The economic analysis contained in the 2017 PFS does not include inferred resources.5 Inferred mineral resources are estimated based on limited geologic evidence and sampling, sufficient only to imply but not verify geological and grade or quality continuity.

Qualified Person: Rory Kutluoglu, B.Sc. P.Geo., a Qualified Person as defined by National Instrument 43-101, has read and approved all technical and scientific information contained in this news release. Mr. Kutluoglu is the Company’s Vice President Exploration. The QP verifies that sufficient data verification was conducted for the 2017 PFS and that this data is adequately representative of the project.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release contains certain statements that may be deemed “forward-looking statements” with respect to the Company within the meaning of applicable securities laws, including statements with respect to the proposed PMPA and Acquisition, estimated mineral resources and mineral reserves, the timing and amount of estimated production, costs of production, capital expenditures, commodity price assumptions, the Company’s ability to successfully obtain all regulatory approvals and permits to commence and conduct mining operations, environmental risks and title challenges.Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”, “estimates”, “projects”, “potential” and similar expressions, or that events or conditions “will”, “would”, “may”, “could” or “should” occur. Although Desert Star believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance, are subject to risks and uncertainties, and actual results or realities may differ materially from those in the forward-looking statements. Such material risks and uncertainties include, but are not limited to, Desert Star’s ability to negotiate a final binding PMPA, obtain all requisite approvals for the proposed PMPA and Acquisition, including approval of the TSX Venture Exchange, the Company’s ability to raise sufficient capital to fund its obligations under the Acquisition or under its property agreements going forward, to maintain its mineral tenures and concessions in good standing, to explore and develop Kutcho or its other projects, to repay its debt and for general working capital purposes; changes in economic conditions or financial markets; the inherent hazards associates with mineral exploration, and mining operations, future prices of copper and other metals, changes in general economic conditions, accuracy of mineral resource and reserve estimates, the ability of Desert Star to obtain the necessary permits and consents required to explore, drill and develop Kutcho and if obtained, to obtain such permits and consents in a timely fashion relative to Desert Star’s plans and business objectives for the projects; the general ability of Desert Star to monetize its mineral resources; and changes in environmental and other laws or regulations that could have an impact on the Company’s operations, compliance with environmental laws and regulations, aboriginal title claims and rights to consultation and accommodation, dependence on key management personnel and general competition in the mining industry. Forward-looking statements are based on the reasonable beliefs, estimates and opinions of Desert Star’s management on the date the statements are made. Except as required by law, Desert Star undertakes no obligation to update these forward-looking statements in the event that management’s beliefs, estimates or opinions, or other factors, should change.

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